Buying into Obamacare: A better plan comes with tradeoffs

After two months of trying to purchase health insurance on the Maryland Health Connection — a new state-run health insurance exchange that opened Oct. 1 — I finally lined up coverage for my family, trading in a long-held policy purchased in the individual insurance market for a so-called Obamacare policy. Our new policy, which starts on Jan. 1, comes with many more protections than our current plan and will cost us $2,250 less in 2014, but comes with some tradeoffs.

When starting the process early this fall, I figured shopping online for a standardized health insurance policy on the newly created exchange would be a breeze. After all, I’m a freelance health care and insurance writer and have a good grasp on the Affordable Care Act (ACA). At the very least, I thought it would be easier than shopping for coverage nearly a decade ago when we entered the individual insurance market after my wife also became self-employed. That shopping experience led to a 30-hour odyssey, one I chronicled for The Washington Post.

But buying an ACA policy also was an exercise in patience. I encountered numerous hassles with Maryland’s online exchange—confronting error messages, completing applications repeatedly and dealing with overall sluggish performance and problems comparing plans and buying insurance—and unacceptable 2014 premium notice delays from CareFirst BlueCross BlueShield on the cost increase of our current plan. Even if the exchange worked properly, I still would have had to wait nearly two months for CareFirst’s premium notice so that I could truly compare my options and decide whether to keep our existing policy.

On Jan. 1, those in the individual market are among the millions of Americans who can purchase insurance on the new health insurance exchanges. Those who make less than $46,000, (or $94,000 per family) a year will be eligible for financial assistance to lower their monthly premiums. Others, like me, will continue to pay full freight. But everyone will get protections from a cut-throat system.

Those protections—including banning insurers from denying people insurance or jacking up rates on those with medical issues—are why I’ve been looking forward to buying ACA coverage. My state, Maryland, is one of 14 that set up its own exchange; the federal government initially is running the online health insurance marketplaces for 36 other states. According to the Kaiser Family Foundation, Maryland also enjoys some of the lowest premiums rates on the new exchanges.

The problems with the federal exchange are well documented, and overshadowed positive reports on state exchanges working in California, Kentucky and elsewhere. Even though Maryland embraced the ACA and quickly moved to set up an exchange in the weeks after the March 20, 2010 passage of Obamacare, Marylanders faced similar, possibly even worse, snafus as those shopping on the federal exchange. Here’s my story of shopping for coverage on Maryland’s exchange.

The Individual Market

Thanks to the attention Obamacare has received, people are learning more about the individual health insurance market. It’s the place where 19 million people like me have to shop for insurance—the self-employed or those without access to employer-based coverage and who do not qualify for government programs, like Medicare or Medicaid.

The individual market is volatile and can be a particularly costly place to buy insurance, especially for the middle-aged and older set or anyone who has even minor health issues. As a result, most people who buy such coverage don’t last long in this market. Some just stop buying health insurance, but most are priced out of it, kicked out of it or leave after securing more stable coverage in the group market or in government programs. That’s assuming you can even get coverage to begin with, as insurers can reject you based on your health or price a policy so high that it’s unaffordable.

“It’s a lousy market,” says Karen Pollitz, a health insurance expert and fellow with the Kaiser Family Foundation. Nearly one-third of Marylanders who apply for insurance in the individual market are denied. That’s almost twice the national average of 18 percent and one of the highest nationwide, according to Kaiser. It is true that young, healthy adults can buy less-costly coverage in this market. Yet, individual market insurance is typified by Swiss cheese-like coverage, paltry (or zero) prescription drug benefits, missing maternity or mental health coverage and coverage restrictions that can lead to seriously high bills for those who get sick.

I’m considered a veteran in the individual insurance market, as my family has kept a CareFirst high deductible policy ($1,000/individual; $2,000/family) for nine years, after my wife started a full-time private clinical psychology practice in 2004.

Here’s how I described the market in The Washington Post then: “Double-digit annual premium increases are the norm, policyholders lack many protections enjoyed by those who are covered through employers, and the coverage pales in comparison with group insurance. If you’re sick, either before you enroll or when it’s time to renew your coverage, the individual market is even harder on your wallet and your options are severely limited.” In fact, former District of Columbia insurance commissioner Lawrence Mirel nine years ago called the individual insurance market “discriminatory” for individuals who are self-employed. This still holds true today. It changes on Jan. 1.

Shopping on the Exchange

Because of the new ACA protections, I’ve had Jan. 1, 2014 circled on my calendar since the law was passed nearly four years ago. Anyone who runs a business—small or large—understands that unpredictable costs are big threats. For a decade, our individual insurance policy represented my business’s—and my family’s—biggest unknown cost. How much would the policy’s premium increase each year? How much would costs increase if one of us became sick? Would we be left uninsured if one of us got seriously hurt or ill? How many coverage gaps would we find should we really need to rely on the insurance?

What ACA bans on Jan. 1: coverage denials based on one’s health status; medical underwriting; lifetime limits on coverage; and premium increases pegged to your health (now only to age, gender and location). The rollout of the web-based health insurance marketplace has been disastrous, but time should make it easier for consumers to shop for plans, which are standardized around a package of 10 essential health benefits, allowing for more apples-to-apples comparisons. Aside from the exchanges technical problems, the individual market “should become a more stable market,” notes Pollitz, who says today there are “as many premiums as there are stars in the sky.” (Although it’s notable that the American Academy of Actuaries said President Obama undermined his signature law and consumers’ pocketbooks by flip flopping last month when he provided states the ability to reverse health insurance cancellations on certain individual market policies issued after ACA was passed.)

Before shopping, I figured we’d pay about the same or a little bit more than what it costs us today for coverage. That would be fine for more coverage and, more importantly, protections from the whims of today’s individual market.

Those who do not qualify for premium subsidies can buy the same ACA-approved plans offered on the exchange at the same price off the exchange, by going straight to an insurer or broker. “There is no reason to go on the exchange,” Henry Franklin, a Hunt Valley, Md., insurance broker, told me. I should have listened. It took me numerous attempts to complete an application on Maryland’s exchange—an application is needed to shop. Once I did, I found 34 plan options from five carriers.

All insurance plans sold on the state and federal-run exchanges include essential health benefits—coverage more typical of what is sold in the group market and fills in the many holes in individual market policies. One big exception: deductibles tend to run higher for exchange plans than employer-provided coverage. For example, the average deductible this year for a single coverage plan offered by an employer is $1,335, according to Kaiser.

But the average deductible for common “silver” level plans sold on the new exchanges nationwide will run $2,567 in 2014, based on an analysis by Avalere Health. Under ACA, the maximum any policyholder will pay out of pocket (after premiums) in 2014 for covered services is $6,350 for an individual plan and $12,700 under a family plan.

While benefits are standardized, ACA policies differ by the portion of your medical costs an insurer picks up. Plans are divided into four coverage levels: bronze, silver, gold and platinum (catastrophic level coverage is available to young adults). Bronze policies have lower monthly premiums but require you to pick up more of your medical costs, about 40 percent. By contrast, platinum policies have the highest premiums but policyholders only pay about 10 percent of incurred medical expenses.

Although my family is healthy (no one takes medication regularly, for example) and only needed the policy’s insurance coverage a couple of times in those years (most years we never incurred enough medical expenses for the insurance to kick in), our monthly premiums have jumped from $306 to $823 since 2004. After several calls to CareFirst starting in early October to find out how much our policy premium would increase in January (my wife turned 50 in November; I turn 50 this month), I finally found out on Nov. 29: $1,110 a month. Gulp. That’s $13,320 a year for a healthy family.

Our CareFirst PPO policy covers up to 80 percent of covered costs, after we meet a deductible ($1,000 per family member, or $2,000 for the family overall) and as long as we go to network providers (Blue Cross plans tend to have wide networks). We pay 20 percent for most covered services, including hospitalization, until our out-of-pocket costs reach $2,500 per person or $10,000 for the whole family. The policy covers 100 percent of allowable costs after that.

Compared to many plans sold in the individual market, I admit, ours is pretty decent. The glaring exceptions: the miserly $500 drug benefit and reduced coverage for mental health care.

With that in hand, I examined our options on the exchange, and concentrated on the 23 silver and gold offerings. The 13 silver plans ranged from CareFirst BlueChoice’s Health Savings Account (HSA) plan priced at $806 a month to UnitedHealthcare’s Silver Copay Select 1 plan, costing $1,301 a month. I ruled both out: the United plan was too pricy for a silver plan, and I don’t need an HSA, as my business is set up to handle medical expenses differently.

I zeroed in on a CareFirst BlueChoice plan that costs $814 a month, and would essentially double our current deductible to $2,000/individual and $4,000/family. I was hoping to keep our premium payments around the same amount as this year, but realize that will increase our deductible and out of pocket costs. I also considered Kaiser Permanente offerings as I’ve always admired its approach as an integrated health system, but the costs were a bit higher than I hoped.

Meanwhile, the lowest priced gold plan—the CareFirst BlueChoice Gold $1,000—also caught my eye. For $922 a month, that plan would not increase the amount of our current deductibles and nearly cut in half out-of-pocket limit to $3,750/person and $7,500/family, compared to the silver plan (it also reduces our current policy’s family exposure, but increases costs for any one individual).

Notably, the drug coverage in this gold plan is the same as the silver plan—requiring us to pay between 20 percent and 40 percent of the “allowed” benefit, depending on the medicine, and only after we meet our deductible. Preferred generics can be had for only a $10 co-pay, however.

The gold plan would require us to pay $20 for a primary care visit that was not for preventive care (that’s free) and $30 for a specialist visit, after paying a separate $25 deductible. That’s less than what the $814 monthly silver plan would require. Both policies cover pediatric dental care, and the gold also provides eye exams and glasses for kids. All the other coverage is pretty typical.

One big concern: all the reports around the nation of health insurers limiting their provider networks. I called CareFirst to see if they were reducing the size of their networks overall or for the two plans I was considering. A company spokesman said the networks for exchange plans “are not substantially different.” Rebecca Pearce, the former director of Maryland’s exchange and who previously worked for CareFirst and Kaiser, also told me she did not see signs of insurers in Maryland limiting networks.

In the end, we opted to buy the CareFirst gold plan, an HMO. While it will cost us nearly $1,300 more a year in premiums than the silver plan, our deductible will be lower and out-of-pocket exposure less overall. Another view: it provides more security than our current plan, and saves us about $2,250 in premiums.

However, on Dec. 19, I ended up purchasing the CareFirst gold policy off the exchange, as I found buying on Maryland’s exchange was almost impossible. (Click here to read what happened once they finally called back.) I called a broker who, at no extra cost, set me up in minutes with the same ACA-protected policy for the same price. Overall, I’m relieved to have the new protections against an often punishing individual market and more predictability that should come as a result. We got a new policy with more coverage and at a lower cost than our current policy. The tradeoffs include moving from a PPO to a more restrictive HMO, and higher out-of-pocket costs if an individual family member needs care. Overall, I am surprised by the high out-of-pocket costs that riddle many exchange policies, even after hefty premiums.